Subordinated Convertible Notes Payable

6 Months Ended

Jun. 30, 2014

Subordinated Convertible Notes Payable

Subordinated Convertible Notes Payable

9. Subordinated Convertible Notes Payable, Related Party

Subordinated convertible notes included notes payable to UBA (the “UBA Notes”) for a total value of $3,543,100 as of June 30, 2014, including interest at the prime rate plus 1.5% per year, but not to exceed 10%. Thirteen of the UBA Notes are convertible into common stock at a rate of $1.50 per share and one UBA Note is convertible at a rate of $1.44 per share. The UBA Notes have been extended until June 2015 but have automatic renewals after such maturity date for successive one year terms, provided that either the Company or UBA may elect not to extend the term upon written notice given to the other party no more than 60 days and no fewer than 30 days prior to the expiration of the applicable term. Under the terms of the UBA Notes, UBA may demand payment within 60 days following the end of the extension period but UBA has agreed to subordinate the UBA Notes to the Company’s long-term debt agreements with Cole Taylor, which mature in June 2016. Therefore, the Company will not require the use of working capital to repay any of the UBA Notes until the Cole Taylor facilities are repaid. The UBA Notes include $1,627,700 and $1,582,500 of accrued interest at June 30, 2014 and December 31, 2013, respectively.